With plenty of today’s trading having taken place already and the Building Permits number from the U.S. having turned in a slightly negative outcome all eyes now turn to the Federal Reserve’s FOMC Statement. The monetary policy has been anticipated for at least a couple of weeks and has caused the USD’s momentum to be under severe scrutiny. The USD has continued to trade to the weaker side of its range against the EUR and GBP as some traders may be speculating that the Fed is going announce another round of quantitative easing. The FOMC Statement however will definitely deal with the state of the American economy and its prospects. There are no doubts that interest rate policy will stay extremely low and that the Fed will also warn that the cheap rates will stay there for a prolonged period of time.
The aspects that have investors on pins and needles are the possibilities that the Fed could issue a surprise on the prospects for the economy. Last month’s report in August triggered losses on the equity markets when the Fed warned that the U.S. economy was struggling. Because it is now an election season it will be of high interest to see how the Fed maintains its political neutrality and keeps its wording about the economy diplomatic if it believes the economy is still within the grasp of difficult times. Stability has been achieved, but the question all investors are asking is what type.
Risk appetite this morning helped spur gains in many of the European bourses and this was brought about by gains on Wall Street yesterday that were stronger than the lackluster ones seen previously. The global equities are seeing widespread climbs and as long as a taste for investing in corporate shares continues the EUR and GBP are likely to maintain consistent values and increase on occasion. There was no major economic data released today from the E.U., but tomorrow Industrial New Orders are on the table. Public Sector Net Borrowing has been released from the U.K. already today and the outcome showed that the government is spending more money than anticipated, which may eventually raise concerns about its budget practices. Because of this the GBP has struggled some during today’s trading.
The JPY has managed to achieve a considerable amount of consolidated trading the past two sessions and is moving slightly towards the weaker side of its non vibrant stance as of this writing. Investors must remain vigilant about the BoJ’s intervention and they may be waiting for the next round of impetus, which may come about if the Asian bourses start to turn in poor results. Until the next round of risk adverse trading shows its head the JPY is likely to remain on an even keel with only slight changes in value. The AUD is trading at the higher realms of its value and it continues to do this under the guise of strong Gold prices and a local equities market that continues to mirror a collective optimism. However, the price of the AUD is nearing the top of its value and traders certainly may be tempted to test its range if they suspect the price of Gold may be in for a letdown.
Market participants will likely be cautious the remainder of the day until the FOMC Statement later. Equity markets globally will be affected by the winds blowing from Wall Street and the sentiment that this generates among the major currencies. The major economies of the world are all showing signs of stress as the U.S., Europe, and Japan continue to have large storm clouds over them – even as some venture forth in the water. While the equity markets have done well since September and commodities have also shown an ability to gain value, a large segment of investors have questions about the long term prospects for growth.
Written by bforex.com
